In venture capital, it’s common for founders to want a ‘yes’ or a ‘quick no’ from VCs when fundraising.
As a founder (and a VC too), I have come to disagree with this approach.
Over time, I have seen the assumptions in this approach repeatedly proven wrong in reality. In fact, they actually disadvantage both the founder and the VC.
First, founders look for ‘quick nos’ for closure, and to expect some meaningful feedback from VCs. But this is rarely the case. Secondly, and more fundamentally, this approach forces a door closed when it could remain ajar for the future – for both the founder and VC.
Feedback, what feedback?
When meeting an early stage VC, founders should rarely hear a question they haven’t thought of before. To win in business (and fundraising), you need to be a subject matter expert.
VC meetings should be a healthy dialogue with explanation, understanding and discussion. But they should never involve a VC giving advice (one exception: when a VC is a founder in your sector).
Given this, don’t expect a fundraise process to yield meaningful feedback on your business. It could yield feedback on you, but not your business.
VCs are network-building animals. They don’t want to sour relationships. They rarely give the hard-hitting reasons for declining. I’ve seen this time and again.
When you are being rejected pre-series B, and your market isn’t objectively small or competitive, many VCs think you are simply either:
- a bad storyteller
- too inexperienced or
- don’t understand your market well enough.
This isn’t great feedback to give someone who is pouring their heart into their business. Add in the relationship factor of VC, and the chances of getting real feedback quickly fades to zero.
VCs that give real feedback are truly rare (and superb individuals). But most of the time, feedback will be spurious and of no use to you. “More traction” or “too early” is just code for “I don’t believe in you right now”.
So don’t look for a ‘no’ in the hope that you will get feedback. 99 times out of 100, that feedback will be of no use.
‘Ghost’ better than ‘no’
In the absence of a positive outcome, instead of wanting a concrete negative one, try a different approach.
If a VC does not follow up energetically after a meeting, 99% of the time you have gone into their maybe pile. The VC maybe pile looks like this:
When you are in the maybe pile, you are not out the game. Don’t get angry or frustrated. Don’t hate the player or the VC game. Play the game.
A key tenet of B2B sales is knowing when to pause a lead that isn’t moving. You must learn to do this if you are to allocate resource efficiently. Fundraising is no different.
If you don’t hear back from a VC for 2-4+ weeks after a meeting, don’t hate the VC. Put the VC in your maybe pile.
VCs in your maybe pile haven’t rejected you. They are mostly curious but lacking conviction. They don’t want to shut you down, and in fact can be great co-investors if a good lead emerges. They can make a good round an oversubscribed round.
In many cases, the market demands a VC to give a ‘quick no’ when they are unsure. Mercy killing, if you will.
But deep down, VCs don’t want to do this. They want optionality. When they aren’t 100% sure, they know they could be wrong. This is why ghosting happens.
Put into practice
As a VC, I have always sought to give ‘quick nos’. I was taught it is the ‘right thing to do’. But as a founder, I don’t want a ‘quick no’. I’d rather have a ‘hmm maybe’ – if that is the actual answer.
VC is a difficult judgment game. If Mr/Ms VC needs more evidence, I’m cool with that. Let’s chat when there is more evidence.
If you are a founder, take the same approach.
If the VC is ghosting you, they are leaving the door open. Sure, don’t let them lead your round. But they could still be good for you.
Have them in your maybe pile. Come back to them when you have a lead and traction in your round. You will be surprised how many VCs will re-engage. Nothing works better for re-engaging a ghosting VC than a bit of ’round FOMO’.
As a founder, it doesn’t make sense to ask for the ‘quick no’. Keep the door open with silent VCs. You are not in their ‘no’ pile. Don’t put them in yours. Just play the game.
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